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Basic Income has opportunity costs

Basic income may eventually become necessary — it may alleviate or even help to eliminate poverty — but it won't automatically fix all our problems. It also may not be the best use of our resources. And no matter what, it warrants immense consideration from all angles.

The following is a transcript from an interview conducted for Upstream Radio episode 6: What basic income could do for our health, with Danielle Marin and Armine Yalnizyan. You can find the podcast here, or listen to this full interview here.

This piece is brought to you by Upstream volunteer Suzanne Merchant, and her stellar transcription talents.

 

Jared Knoll: Thanks for joining me, Armine.

Armine Yalnizyan: Thank you Jared, it's a pleasure.

JK: So, talking about basic income and before we get into the compendium and stuff, maybe you can start by just talking about why income inequality is an incredibly complex issue and we know that in our current market system we need income to have a healthy life. But does income equality affect the health of our communities at large?

AY: Yes, and that's because income inequality morphs, as we are seeing in all of our big cities and smaller ones too actually, into spatial inequalities. You know there's always been the good side and the bad side of town, but we're seeing poverty by postal code and we're seeing cities with fewer middle-income neighbourhoods, and more rich and poor neighbourhoods.

So as income inequality morphs into lived experience, we're seeing people being born into and raised with different qualities of housing, of different qualities of education, transit, recreation, and of course of employment opportunities as a result. So income inequality actually triggers spatial inequality and what people in the health care business call deprivation amplification.

So to reduce your health inequalities that come out of this, it's not just about reducing income inequality. If you want to reduce income inequality long term, it requires you to redistribute opportunity and building solidarity. Consequently closing the income gap, while important, is definitely not enough to change the way the game works.

"We're seeing poverty by postal code."

JK: It's such simple idea, in a certain way, just giving people money... but at the same time, it's being seen as so radical - and there are maybe other things that we can do that are more radical - but why do you think that this idea of just giving people money is so popular now? Is there something about what we're experiencing now as a nation, or internationally in trends that can explain the hyper-popularity of basic income?

AY: Yeah, it's a little bit surprising how popular it has become so quickly. I think there's several things at play here: first, the idea that, you know, work used to be your ticket out of poverty. This is no longer the case, that's quite evident; especially for young people and the growing precariousness of work. And yet, the government commitment to full employment has fallen off the agenda. And not only full employment... in places like the United States, we have by the numbers... we are seeing elevated levels of poverty. So that is an issue that of course needs attention.

It's not just the number of people working but the quality of those jobs, and the wages/income that they are earning that requires attention by public policy. And if anything, some forms of public policy such as opening the floodgates to temporary foreign workers has been making things worse for the next generation of newcomers and young workers. So that's one thing is that we are taking our hands of the wheel on the thing that can most reduce, or has traditionally most reduced poverty in our communities, which is our jobs.

"It's not just about reducing income inequality."

But the second thing is that in the last three or may two and half decades, the real prevailing public policy has been of governments "putting money back into your pocket", that's their language. It's about tax cuts... and while basic income looks like a more progressive way of doing that, it's actually effectively - it's identical a tax cut except that it's going to presumably, going primarily, to those at the bottom.

Of course, we haven't discussed the design of this yet, but the idea of the basic income is that everyone gets a minimum amount or the poor get enough to lift them out of poverty. Those are kind of the two overarching ideas behind basic income. In both cases, more money in your pocket doesn't buy one more high-quality child care space, doesn't build you one more unit of affordable housing. So people have more money but their lived reality has not substantially changed.

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JK: And that's something you've focused on - reducing not so much the gap in income inequality but the gap in consumption equality. Why are things like childcare and housing better options than solving things through the income fix?

AY: I'm not saying it's better but I'm saying it's worth a consideration of the opportunity cost considering how much it costs to put money into people's pockets versus actually changing the set of opportunities that are out there that are of high quality for people of all income classes, which would help poor people the most if you designed the program to be that way. So why do I look at that, well we know that when we look at social determinants of health that the number one issue is how much you eat and the quality of nutrition. Valerie Tarasuk's work has been extraordinary in this regard.

"Work used to be your ticket out of poverty. This is no longer the case."

But we also know that how much you can put on the table is a function of how much of your budget is going towards shelter costs; I have been working in this area for thirty years and for most of my life I have heard the same refrain: "If you solve the housing problem, you solve the hunger problem." So actually creating more units of affordable housing in our biggest cities, in particular where rates of poverty are highest would go a long way to improving people's health.

But secondly, we know, from again the great work of scholars in social determinants of health that if you want to improve health outcomes you invest in people early in life, and the earlier you invest the better the outcomes. And there are these very evocative curbs for early childhood education, which when invested, particularly in low income households improve life chances, incomes and educational outcomes for these young people and do so over the course of their lives. And the bonus of investments in early childhood education is they literally pay for themselves.

"Creating more units of affordable housing in our biggest cities, in particular where rates of poverty are highest would go a long way to improving people's health."

Some fantastic work done in Canada by Pierre Fortin of Quebec showed that every $100 of daycare subsidy paid by the Quebec government paid back a return of a $104 for the Quebec public coffers and a windfall of $43 for the federal government. So literally childcare pays for itself and makes a huge difference in people's lives. And then the third thing that makes a big difference is transit because people are moving to the suburbs because they can't afford to be closer to where they work; so we either do it through urban planning, which we haven't been doing particularly well as we've been adding housing stock to the cities, they tend to be in the downtown cores where people can't afford to live or we do it through bringing people to their work/school more efficiently through better public transit.

So you can't bring in... I think it was a million people we brought into Canada last year, every year we bring in more people that are added to a housing crisis in the big cities and there's no transit to move them. So these are the three things: housing, early childhood education and transit that would make the biggest difference at the fraction of the cost. By the way, I mentioned these three things, they would cost $7.6 bn a year, according to the alternative federal budget to be done properly and at the end of ten years, we have a bigger stock of childcare spaces, of housing - of affordable housing - and of public transit options. Whereas with "money-in-your-pocket", it disappears and you see no growth in public assets.

"The bonus of investments in early childhood education is they literally pay for themselves."

JK: And in talking about all these different things that are not only, in a way, easier to integrate/implement, but also we know that in the long run they pay for themselves, they're giving people housing-first approach to living space, making sure everyone has enough to eat, investing in childcare - things that we know that for every dollar we get in, we get three, four, five dollars back - why is it that we've taken so long and why is that people's attentions are not grabbed by that? How can we make housing sexy so that we can make those things come along with ride with the new, progressive social investment model?

AY: I think that the basic income conversation simplifies to a level where people think it's a magic bullet. And of course, there's all sorts of unintended consequences with this policy direction... which apart from it's costs could undo some of the good it would do. But I think it has grabbed people's imaginations in a way that it seems that "governments can't get anything right and maybe this is something that it can get right?" I don't think that it'll be easy to make housing sexy. I think we're all freaked out by what is happening in places like Vancouver and Toronto, but also by the collapse of oil prices in Calgary. These boom-and-bust cycles make housing markets seem impenetrable and also unaffordable.

And the idea that you could do something to beat the market seems... unlikely. Where that's crazy because if we had, for example, inclusionary zoning in any of these cities, we would have been riding this market and creating more affordable housing as a predictable share of all housing that is built. So we kind of missed that boat, I think at some level. And there's nothing less sexy for people that don't have toddlers than early childhood education and a lot of people I think are so... increasingly... alright I'm going to get a little meta on you here, Jared. But if you think about what's going on in the United States and Britain... in Britain the phrase "Britain first" has accelerated in usage since the run-up to the Brexit vote and post-Brexit.

In the United States, Trump is talking about "Make America Great Again" and this "me first" policy is also reflected in ad campaigns everywhere. I think we're in an era, a very "I" dominated era, I am not of course the first to talk about this, but the degree to which our political leaders from the top are sending the signal that it's fine to worry about yourself [only] and why should you worry about anybody else is really accelerating this idea that collective action isn't where it's at, it's "What have you done for me lately?" to channel Janet Jackson's great song; it's how much money have you put in my pocket and that's all I care about.

And that's the common denominator: cash. But cash does not solve everything, when it comes to an era where we are seeing much slower growth than we have seen in a hundred years and it appears that we have that trajectory on the horizon, we are going to need to use every dollar very wisely. It does really harken back to a Tommy Douglas mentality of "why use a dollar when ninety-nine cents will do?" But that's now being considered a consumer thing.

Right now we should be looking at that from a government and a public provision point of view. Is there a way of getting better access to the things that we need to use everyday that we would otherwise have to spend more money on? Is there a way to get these things for cheaper at scale?

For example: oral health, pharmacare, post-secondary education, and of course the top three in my list which are housing, early childhood education and public transit. So I think there are much better things that we can be doing with our money but it requires us acting together and that's the tough nut to crack. When you talk about basic income, it's just simply "how much money do I get?" and "will it help me get by?" When we are talking about these policies, it requires working together and we're moving very rapidly away from that direction - the direction of collective action and solidarity - and in the direction of "what have you done for me lately?" and I think that's a problem at a very meta level.

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JK: Absolutely. You are talking about the problem of "Slow Growth" - that's in the title of your chapter in the new CCPA [Canadian Centre for Policy Alternatives] compendium Basic Income in an era of Slow Growth. Can you talk about what your goals were for that chapter and what are the goals of the CCPA for the compendium more broadly?

AY: Well, I think that the CCPA's compendium comes at a remarkable time in Ontario where we are about to discuss the way that a basic income program should be established and what that compendium is does is say that this is a remarkable opportunity, the first perhaps, in half a century to talk about the type of world we want to create through public policy and the role of the market in that. So I think the compendium tries to layout "here's what the basic income can do" and perhaps is long overdue in doing because you know, it's not like we've evolved to some kind of nirvana when it comes to the welfare state.

"Cash does not solve everything."

So are there improvements to our income support that we can introduce now as the public appetite for this discussion opens and governments interest in trying to do something in this direction also seems to be at a record high for the last very long period of time. So there's those positive "Here's how you could improve" income supports in Canada, or at least in Ontario. Key amongst which is what are we doing about welfare?

We cut welfare rates dramatically through a Conservative-elected government in 1995 and those rates have never come back. For your listeners who are not in Ontario, for a single, so-called employable person on social assistance in the Ontario program would gain no more than $8000/year and a person with a proven disability would get $14,000/year. The poverty rate in Ontario is something like $22,000/year, so it gives you a sense of how far below the poverty rates these [current] rates of assistance are.

There has been across this country lots of discussion in the intervening years of '95 till now on how to improve or what to do about welfare. Nothing has been done thus far and this is an opportunity to talk about how to improve welfare including improving the dignity of those who receive welfare by having it not be overly intrusive. But I have to say that with basic income, the models that are the least intrusive go through the tax system and there will always be people that need emergency financial support, so we will always need some form of public support of last recourse that does judge and assess your need in order to turn on the tap for that public money. So even a basic income program wouldn't get rid of the need of some form of last minute social assistance.

The compendium also looks at what are some of the unintended consequences of basic income, what would be the impact on women, for example. Not to fetishize paid work or anything, but we have seen a remarkable increase in women's participation in the paid labour market in the last couple of decades. But we have also seen that every time we increase public income support to families, for example: what was, under the Harper regime, the universal child care benefit, which was a $100/month, every time you turned on the taps on that kind of thing, or even income splitting, you see women's labour force participation rates drop.

"Is there a way of getting better access to the things that we need to use everyday that we would otherwise have to spend more money on? Is there a way to get these things for cheaper at scale?"

So we know that's one of the things that will happen if you increase basic income, women, in particular those at the margins, will take the alternatives to paid work because of family obligations and all sorts of other reasons, will then do unpaid work in the home rather than do paid work in the labour force, and we need to question whether that is something we really want to do via public policy. And as I said, right off of the top, the biggest issue that is raised by this compendium is the loss of focus on employment and living wages as worthy goal of public policy as basic income... instead of raising the white flag of surrender and saying "the robots are going to eat all of our jobs, let's just give people some cash", let's start thinking about how we can create a great labour market for the next generation of Canadians who are the most educated people out there.

We have never seen this level of education, surely we can put that to good use without declaring defeat in the labour market. They are also the most precariously employed generation of Canadians and so in Ontario, another thing we're doing is revising labour laws and employment standards, so statutory legislation that governs the rules of the road in the workplace. Lots more needs to be done but these are all things that can be done to improve equal pay, better working conditions and making sure that everybody that's working gets a fair shake, not just the ones who are retiring. The corporations are busting through corporate profits records, so why is it that it's getting harder to pay an actually shrinking labour force?

So these are questions that the compendium raises that we need to think about and I'd like to think that my contribution also says "we can do better with the money that we've got, if we think about a nice mix between income and social supports that doesn't just put money in your pocket, but also builds solidarity and builds opportunity while reducing the things that ruin our health essentially (through the social determinants of health)... or maybe I should phrase that more positively - improving the social determinants of health and thereby seeing better outcomes, better health and a better quality of life for everyone.           

JK: I think that your piece and your work, especially in the last several years, has been such an important balancing force because so many people are on the hype train for basic income and to have that other perspective of "let's marshal some resources/ attention to the other side of things [social supports etc]" is so crucial, do you think though that in the context of precarity, our last episode of Upstream Radio, we spoke with folks like Andrew Cash and Ritika Goel on the Precarity Problem, do you think with the rise of casual labour, unpaid internships, self-employment and automation where we see retail, fast food and transportation, both for products, like truck driving, and taxi drivers, Pittsburgh, for example, has already gotten self-driving cars with drivers behind the wheel just in case, do you see the present and future of a post-work Canada where we might need to have some kind of income fix for the people because forget the working poor, there is just no more working? 

AY: So, I don't buy into the "there's no more working" although I appreciate that this time it could be different and the reason I don't buy into it is because I look back into history and see how many times this same narrative has been spun out and in the wake of each one of these fears that there'll be no more work: for example, textile manufacturers in England, people who used horses instead of trains for transportation, the rise of oil and automobiles, the earliest wave of robots in the 60s and 70s, and the beginning of the mechanization of the workplace, in the wake of all of these fears, the same conversation has occurred. Yet, at the end of that period of technological transformation, there have been more jobs not fewer jobs. Humans are endlessly inventive and so I don't buy that we will have no jobs on the other side [of the transformation] and that we'll need income support because so many people are going to be left out of the labour market.

"We will always need some form of public support of last recourse that does judge and assess your need in order to turn on the tap for that public money."

I do buy that this wave of technological change and this era of slow growth is going to lead to a rate of corporate consolidation that we have perhaps only seen a hundred years ago when it triggered the rise of anti-trust legislation to break up large powerful corporations. I think we're moving towards a Blade Runner economy because we keep throwing up our hands at the prospect of collective action and really fetishizing "dollars in your pocket" and the ability for you to fix everything on your own... and it doesn't happen that way.

If corporations are consolidated, you're going to need even bigger bargaining power on the other side of the ledger; that's either going to come through governments standing up and being arbiters for the well-being of their citizens or it's going to come through some form of collective action whether it's through unions or some other mechanisms. In civil society, to form coalitions... you can maybe even look at what's happening with the pipeline debate as one of the nascent stories of people getting together to say "no" to particular corporate forces.

The reason I'm talking about this is because you cannot underestimate the power of solidarity and when I think about the basic income, I think it undermines solidarity, I cannot imagine any scenario in which where everybody is going to get a cheque cut for lifting them above the poverty line. Any analysis that has been done by any economist of what that would cost in Canada makes it [basic income] extremely expensive... but let's say for whatever set of reasons, we have this unusual consensus that says that basic incomes should be test piloted in various jurisdictions because this seems to be next big thing, lets say we have some weird consensus that says everybody should get a cheque that makes sure nobody lives in poverty, two things arise: number one, these are just dollars chasing insufficient stock of housing, right?

So that will raise the prices of everything unless you have rent control, unless you have price control, all you're doing is adding more money and stirring and that makes the market spin around faster with people searching for things... the stock of which has not increased.

The second thing that happens is that somebody is paying for somebody else to get so-called "free money". Again, I'm going to use a music analogy with Dire Straits, "money for nothing and your chicks for free", the idea that somebody is going to get free anything and I'm paying for it drives taxpayers crazy. So, even if you were to get there, I don't think the consensus would hold very long. And if you think there's been a tax revolt in the last twenty years, wait for the next twenty years, if we should get what we wish for, which is adequate incomes for everybody through an income support system.

Better, for me, to say let's assure that everybody that is working is getting adequate incomes, that we're helping those who cannot work, whether they're seniors or sick, episodically or chronically, or whether they're unemployed, that we help those people in those circumstances for adequacy, and part of that is making sure that whether you've got money or you don't, there's access to the basics of life, and I've mentioned them before and I'll mention them again: people should be able to go and upgrade their skills at anytime for free, through free post-secondary education, people's children should not be a massive drain on them when they go to work - early childhood education should be heavily subsidized.

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Nobody should be worried in a country as cold as Canada about having shelter over their heads and that requires a massive push in housing policy, Canada being one of the only nations in the world without a national housing policy, but cranking up the immigration numbers. Can you believe it? We're bringing in more and more people to the country and we've no place to put them and no transit for them because we have no policies. So these are the things that I think makes life more livable and reduces the tensions between groups of people rather than cranking it up because we've accomplished something that may not even be needed in the end.

Basic income is not needed because of technological change, basic income is needed because our forms of income support are either capricious or inadequate and we can fix those things. And we can fix them through the tax system but we're never going to be able to fix them through a cookie-cutter system like a tax system and so consequently we're going to have to pay attention to the civility and the humanity of the income support systems that we've got, and to improve those. There's just no ducking that.

JK: That's a pretty awesome round up of the reasons why we shouldn't necessarily go gung-ho for this, or at all. Speaking of immigration, that's one of the more popular fears along with disincentivization for work that people in the mainstream discuss a lot. If we were to go for a system of just handing out money isn't that going to incentivize a great deal of immigration to Canada to take advantage of that system? Do you think that's a fear with some basis? Or is that something that we should not be focused on?

AY: At the moment, I think we have bigger fish to fry on the immigration front. I think we are facing a humanitarian crisis in the Middle East that is not restricted to Syria... the Middle East in general is topsy-turvy right now, and we have a federal government that has committed to opening up its immigration levels for refugees and for family reunification purposes. I think that's pretty awesome, though you're right it may raise some issues and some of those issues may be quite legitimate. People are coming here... going through unbelievable trauma before they get here and may not be ready to jump into a job right away.

It is possible that they'll need to be physically and mentally healed for a while, but in the end will contribute more. So you do raise a legitimate question, but our bigger immigration policies are not associated with immigration, but as I mentioned before, the temporary foreign worker and temporary entry policies that would be what actually eclipses our immigration policies should the trade deals come through because of the temporary entry provisions in those trade agreements. So, I think our immigration issues may be more of a threat to full employment and gainful full employment; full employment that is good jobs paying good wages and providing good workplace benefits.

"Basic income is not needed because of technological change, basic income is needed because our forms of income support are either capricious or inadequate."

Those things need to be attended to and when you attend to those things everything follows a pace. But if you take your hands of the wheel and say that whatever corporations want, corporations get, it's always going to be a question of the government mopping up over these market failures which are baked into the system because of policy. So I wouldn't worry as much about abuse of basic income by immigrants, and having more people coming here and abusing the system, as saying we don't need that system as heavily when we make sure that the underlying market forces work for everybody, not just a select few. And that's the role of the government, as much as redistribution, is making sure that pre-distribution, the way the market actually delivers, is delivering optimally... and that's the part that I think has not received as much attention and that I hope will! 

JK: Some really interesting things there to think about. I've got one last question for you Armine and you might hate it... you're probably going to hate it. But I've got to ask it for the sake of the journalist in me for creating an interesting narrative here. If you woke up tomorrow with a phone call from Parliament Hill and they said, "Armine, this basic income thing is going through, we're rolling it out" and you could give them a 30 second or one minute pitch to make it as beneficial as possible, or as least problematic as possible, what would you say to them?

AY: You're right, I hate your question. I guess my pitch would be: spend at least half of what you spend on basic income on providing basic services and see what happens.

JK: Ok, excellent. Groovy. Is there anything I haven't asked you that you want to get out there as part of the conversation?

AY: Just to say that I don't think that solidarity has been explored enough in an era of slow growth... everything starts to look like one person's gain is someone else's loss. I think that slow growth really creates fractious politics, increasingly so, and we're seeing evidence of this all over the world, and at that moment we get a lot of leaders that are telling you, think about yourself first and foremost. I think we're in for a lot of trouble if that's the only way we can think our way to solutions to problems is how do I benefit from it whereas collective action solutions may reduce the costs, improve the outcomes and reduce the tensions, and it's time for us to think about what forms of collective action rather than dollars-in-our-pockets are going to fix this era of slow growth that I fear is upon us for the next few decades, which may not be the worst thing in the world but is viewed as some kind of economic catastrophe.

Slow growth is not a catastrophe but it does need to be managed in a way that none of us have had to consider... in the last over a hundred years. And nobody has a lived memory of how to deal with the prospect of economies growing very slowly and what that means for living peaceably together... and I don't think basic income is the solution to that. 

JK: What a great call to action to end on. Thank you so much Armine for speaking to us today and for all the work you continue to do on this front. 

AY: Thank you very much, Jared. I know it's not the most popular view out there but I really appreciate the opportunity to put some flesh around its bones. 

 

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Yalnizyan_Oct_2015_2.jpgArmine Yalnizyan is a member of the Upstream Advisory Group, a Canadian economist, writer and public figure focused on the social and economic factors that determine our health and well being.

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